By Ion Jauregui - ActivTrades Analyst
The IBEX 35 is at an interesting juncture. Despite the fact that the average of its stocks is trading at just 40% of its historical highs, the national index is 17% away from its 2007 high, having reached a resistance at 13,466 points (19.69% since 2007) on Tuesday, March 3. This data shows a significant gap between the upside potential and the reality of current share prices, raising questions about the Spanish market's ability to sustain itself in the midst of an uncertain global economic environment.
At the beginning of the year, the European stock market experienced a spectacular rally, with some indices rising by more than 15%. However, volatility once again set the tone in March, driven mainly by Donald Trump's tariff threats and a series of geopolitical uncertainties that have permeated international markets. In this context, the IBEX 35 has shown resilience by holding above 11,000 points, a level not seen in the last 17 years, and has avoided radical changes despite momentary corrections following relevant decisions by the US Federal Reserve. One of the most striking points is the heterogeneous behavior of the companies that make up the index. While some, such as Iberdrola and Aena, are close to their all-time highs, others have suffered drastic declines. Colonial, Sacyr and Telefónica, for example, are down more than 80% from their best levels. These differences illustrate not only the particularities of each sector, but also the difficulty of achieving a uniform recovery in a market marked by a wide dispersion in corporate fundamentals.
Colonial, Sacyr and Telefónica: paradigmatic cases
Colonial's situation is particularly illustrative. In times of real estate boom, the socimi reached an intraday high of 1,423 euros at the end of 2006, during the time when Luis Portillo was leading the market. However, the real estate bubble, which led to a global crisis after the bankruptcy of Lehman Brothers, left its mark on the stock. Today, its shares are trading at around 5.5 euros, with slight increases of around 5.4% a year. Analysts, through the market consensus collected by FactSet, put the target price at 6.5 euros, suggesting a potential recovery of 18% in the short term. However, some analysts see an even greater upside, placing the price at 8.5 euros.
Sacyr, on the other hand, has experienced a 92% drop from its best mark, when it traded at around 42.976 euros. At present, the share is trading at around 3 euros, despite having shown some 4% appreciation so far this year. Sacyr's history, marked by a hegemony that once led the group to attempt the acquisition of BBVA, has been overshadowed by results that have not lived up to expectations. The operation with Eiffage, which initially seemed promising, ended up being complicated by legal problems in France.
Telefónica is another example of a turbulent trajectory. The multinational reached all-time highs at the beginning of the century, reaching 27.96 euros at the height of the Verónica deal, which consolidated its position in the Latin American market. Today, its shares stand at around 4.3 euros, a fall of 85% from those levels. Expansion into the German market, through the acquisition of UMTS licenses for the 3G system, considerably increased its level of debt. In the last fiscal year, the ratio of net debt to EBITDA reached 3.18 times, 47% higher than in 2000, reflecting the difficulties the company has faced in balancing its growth with a robust financial structure.
The overall outlook and short-term expectations
Despite the specific challenges of some of the largest IBEX 35 companies, the index as a whole has managed to maintain a sustained advance. The Ibex Total Return has emulated the EuroStoxx 50, reaching historic highs of 12,850 points, although the dividend-free index is still 17% off its highs. This situation creates a dual scenario: on the one hand, there is optimism that the economic recovery and the stabilization of monetary policies could lead to a gradual revaluation; on the other hand, there is the risk of an abrupt correction in the face of new external shocks or internal problems that affect investor confidence.
The geopolitical context and statements by figures such as Donald Trump add an extra layer of uncertainty. Ongoing tariff threats and fears of a global trade war may put additional pressure on the market, forcing investors to reconsider their strategies. In this environment, the role of technical support and trend analysis becomes crucial in determining whether the IBEX 35 will be able to sustain itself or whether it will approach new lows.
Technical Panorama
Currently the index as we have indicated is located above the strong support of 11,239 points where it has consolidated price on at least 3 occasions. If we look at the appearance of the triple bell, the control point (POC) is located around 9,200 points, well below this support. The current trend since October 2022 has been steadily upward. At the present time, it seems to be generating a possible new upward momentum as we can see on the weekly chart a wick that clearly signals resistance to the falls. If we look at the RSI at 69.97% being the week of highs the RSI around 75%. So it would not be unusual a correction movement in the direction of 50% looking to support its rise in the 12,058 points towards the highs.
Outlook and conclusions
The future of the IBEX 35 will depend to a large extent on the ability of its components to adapt to an increasingly challenging global economic environment. Although the index has shown signs of resilience, the disparity in the recovery of its individual stocks shows that there is still a long way to go to regain historical highs. Recent market history, marked by corrections and ups and downs, suggests that any optimism must be accompanied by caution and a constant assessment of risks.
In short, the IBEX 35 is at a crossroads: although it has reached levels not seen in almost two decades, the gap between its values and its all-time highs reveals vulnerabilities that could intensify in a scenario of greater global uncertainty. The key for investors will be to identify those companies that, despite historical declines, present solid fundamentals and recovery potential, in a context where volatility seems to be the only constant.
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
The IBEX 35 is at an interesting juncture. Despite the fact that the average of its stocks is trading at just 40% of its historical highs, the national index is 17% away from its 2007 high, having reached a resistance at 13,466 points (19.69% since 2007) on Tuesday, March 3. This data shows a significant gap between the upside potential and the reality of current share prices, raising questions about the Spanish market's ability to sustain itself in the midst of an uncertain global economic environment.
At the beginning of the year, the European stock market experienced a spectacular rally, with some indices rising by more than 15%. However, volatility once again set the tone in March, driven mainly by Donald Trump's tariff threats and a series of geopolitical uncertainties that have permeated international markets. In this context, the IBEX 35 has shown resilience by holding above 11,000 points, a level not seen in the last 17 years, and has avoided radical changes despite momentary corrections following relevant decisions by the US Federal Reserve. One of the most striking points is the heterogeneous behavior of the companies that make up the index. While some, such as Iberdrola and Aena, are close to their all-time highs, others have suffered drastic declines. Colonial, Sacyr and Telefónica, for example, are down more than 80% from their best levels. These differences illustrate not only the particularities of each sector, but also the difficulty of achieving a uniform recovery in a market marked by a wide dispersion in corporate fundamentals.
Colonial, Sacyr and Telefónica: paradigmatic cases
Colonial's situation is particularly illustrative. In times of real estate boom, the socimi reached an intraday high of 1,423 euros at the end of 2006, during the time when Luis Portillo was leading the market. However, the real estate bubble, which led to a global crisis after the bankruptcy of Lehman Brothers, left its mark on the stock. Today, its shares are trading at around 5.5 euros, with slight increases of around 5.4% a year. Analysts, through the market consensus collected by FactSet, put the target price at 6.5 euros, suggesting a potential recovery of 18% in the short term. However, some analysts see an even greater upside, placing the price at 8.5 euros.
Sacyr, on the other hand, has experienced a 92% drop from its best mark, when it traded at around 42.976 euros. At present, the share is trading at around 3 euros, despite having shown some 4% appreciation so far this year. Sacyr's history, marked by a hegemony that once led the group to attempt the acquisition of BBVA, has been overshadowed by results that have not lived up to expectations. The operation with Eiffage, which initially seemed promising, ended up being complicated by legal problems in France.
Telefónica is another example of a turbulent trajectory. The multinational reached all-time highs at the beginning of the century, reaching 27.96 euros at the height of the Verónica deal, which consolidated its position in the Latin American market. Today, its shares stand at around 4.3 euros, a fall of 85% from those levels. Expansion into the German market, through the acquisition of UMTS licenses for the 3G system, considerably increased its level of debt. In the last fiscal year, the ratio of net debt to EBITDA reached 3.18 times, 47% higher than in 2000, reflecting the difficulties the company has faced in balancing its growth with a robust financial structure.
The overall outlook and short-term expectations
Despite the specific challenges of some of the largest IBEX 35 companies, the index as a whole has managed to maintain a sustained advance. The Ibex Total Return has emulated the EuroStoxx 50, reaching historic highs of 12,850 points, although the dividend-free index is still 17% off its highs. This situation creates a dual scenario: on the one hand, there is optimism that the economic recovery and the stabilization of monetary policies could lead to a gradual revaluation; on the other hand, there is the risk of an abrupt correction in the face of new external shocks or internal problems that affect investor confidence.
The geopolitical context and statements by figures such as Donald Trump add an extra layer of uncertainty. Ongoing tariff threats and fears of a global trade war may put additional pressure on the market, forcing investors to reconsider their strategies. In this environment, the role of technical support and trend analysis becomes crucial in determining whether the IBEX 35 will be able to sustain itself or whether it will approach new lows.
Technical Panorama
Currently the index as we have indicated is located above the strong support of 11,239 points where it has consolidated price on at least 3 occasions. If we look at the appearance of the triple bell, the control point (POC) is located around 9,200 points, well below this support. The current trend since October 2022 has been steadily upward. At the present time, it seems to be generating a possible new upward momentum as we can see on the weekly chart a wick that clearly signals resistance to the falls. If we look at the RSI at 69.97% being the week of highs the RSI around 75%. So it would not be unusual a correction movement in the direction of 50% looking to support its rise in the 12,058 points towards the highs.
Outlook and conclusions
The future of the IBEX 35 will depend to a large extent on the ability of its components to adapt to an increasingly challenging global economic environment. Although the index has shown signs of resilience, the disparity in the recovery of its individual stocks shows that there is still a long way to go to regain historical highs. Recent market history, marked by corrections and ups and downs, suggests that any optimism must be accompanied by caution and a constant assessment of risks.
In short, the IBEX 35 is at a crossroads: although it has reached levels not seen in almost two decades, the gap between its values and its all-time highs reveals vulnerabilities that could intensify in a scenario of greater global uncertainty. The key for investors will be to identify those companies that, despite historical declines, present solid fundamentals and recovery potential, in a context where volatility seems to be the only constant.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.